Do you know? Your banking universe is changing fast

01 Jun 2018, 11:22 AM IST

Bad loans peaking, but capital challenges remain

As Indian banking system struggles to deal with a large pileup of bad loans, the business is witnessing some quick tectonic shifts; with private lenders gaining market shares in advances as well as deposits and PSU lenders focus on setting their house in order. This is how the landscape has changed over the past few months right under your nose.

Private banks log strong profit growth

Profitability at the retail private banks remained strong, with pre-provision profitability improving to 3.5 per cent. Loan growth was strong at 26 per cent YoY. Loans and deposits of PSU lenders grew only 2 per cent YoY and as operating expenses rose 20 per cent, while pre-provision profits slipped 22 per cent.

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Pickup in loan growth moderate

PSU banks saw some pick-up in loan growth during the quarter, as gross loans grew 4 per cent QoQ, with PSU banks that are not under RBI’s prompt corrective action growing their loan books 5.5 per cent QoQ.

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15-35% loans have turned NPAs

Gross NPLs stood at 12 per cent (15 per cent for PSUs), despite 6 per cent of loans being written off in last few years. In aggregate, 20-30 per cent of FY15 loan book has been recognised as NPAs over last three years.

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Which sectors led NPL spike?

The spike in NPL in Q4 was largely from ‘known’ stress, with the power sector contributing 30-50 per cent of slippages. In steel sector too, 30-50 per cent exposure of banks is now NPAs. Total stress loans for SBI and ICICI Bank were down by 100 bp QoQ in Q4 at 12 per cent.

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PSBs’ loss is private banks’ gain

With PSU banks constrained for capital and 30 per cent of PSU bank loans under RBI’s prompt corrective action, private banks continued to gain market share. They have accounted for 40 per cent of loans over the past six months and 60 per cent over the past year.

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Deposit market shifts to private lenders

Private banks also started gaining market share on deposit side, accounting for 60 per cent of incremental deposits over the past 6-12 months, with deposits growing at 17 per cent YoY vs 5 per cent for the non-PCA PSU banks and -4 per cent for the PCA PSU banks.